CENVAT credit when input price reduced after clearance –
Departmental clarifications vide CBEC Circular No
877/15/2008 – CX dated 17.11.08
1. Representations have been received from trade and industry
seeking clarification on the issue whether proportionate credit
should be reversed in cases where a manufacturer avails the
credit of the amount of duty paid by supplier as reflected in the
excise invoice, but subsequently the supplier allows some trade
discount or reduces the price, without reducing the duty paid by
him.
2. The issue has been examined. Since, the discount in such
cases is given in respect of the value of inputs and not in
respect of the duty paid by the supplier, the effect of the
reduction of the value of inputs may be that the duty required to
be paid on the inputs was less than what has been actually
paid by the inputs manufacturer. However, the fact remains that
the inputs manufacturer had paid higher duty. Rule 3 of
Chapter VI : Specified Duties and Taxes Eligible to Credit
61
CENVAT Credit Rules, 2004, allows the credit of the duty “paid”
by the inputs manufacturer and not duty “payable” by the said
manufacturer. There are many judgments of Hon’ble Tribunal in
this regard, which have confirmed this view.
3. In view of above, it is clarified that in such cases, the entire
amount of the duty paid by the manufacturer, as shown in the
invoice, would be available as credit irrespective of the fact that
subsequent to clearance of the goods, the price is reduced by
way of discount or otherwise. However, if the duty paid is also
reduced, along with the reduction in price, the reduced excise
duty would only be available as the credit. It may, however, be
confirmed that the supplier, who has paid the duty, has not
filed/claimed the refund on account of the reduction in price.
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